The EU Directive on Services and its Economic Effects

When the European Commission launched its project to harmonize the European service sector through the directive on services, it did not anticipate the tremendous public response. Although the directive has received high attention in the media and in political circles, its economic implications have not been discussed thoroughly in the economic literature. The goal of this book is to fill this gap by analyzing the short- and long-term implications of the directive on a country's service market and its welfare. It shows - using well proven theoretical models of industrial organization - that in the short-run, all EU countries will benefit from the EU directive on services on account of lower prices and more offered services. In the long-run, however, it is very uncertain if countries with high standards like Germany are better off in the end. It is, in any case, a long and hard walk with socially very undesirable side effects and it is mostly on the local firms to improve their competitiveness. In the book recommendations for economic policy and for service firms are derived on how to benefit from the EU directive on services.